Holcombe: We need a new playbook

At the center of Gov. Phil Scott’s reelection campaign is his claim that because of his efforts, “Vermont has avoided about $71 million in forecasted property tax rate increases.”

If we don’t understand why this claim is flawed, we are vulnerable to poor budgeting practices and ill-equipped to respond to demographic and affordability challenges. Given the federal fiscal outlook, this is folly.

Gov. Scott’s veto budget for the 2017-18 school year used about $47 million in statutory reserves and one-time money to buy a lower average property tax rate. No money was saved, because spending did not go down. Any “avoided increase” in 2017-18 became a “delayed increase” in 2018-19 associated with replenishing statutory reserves and adjusting for one-time monies. Scott didn’t create savings for FY18; he created an IOU.

Here’s an analogy. If your rent is $1,000 and you borrow $50 to help pay your rent, that doesn’t make your rent bill $950. The next month, you still have a $1,000 rent bill, plus a $50 debt to repay.

This past year, school districts had to make up for that $45 million in so-called “avoided tax increases” before reckoning with budgets for the 2018-19 school year.

Boards know affordability is a challenge; they hear it from their communities at town Meeting, the recycling center and the grocery store. That’s why many boards took advantage of bipartisan Act 46. They knew they couldn’t control costs and preserve quality in their current systems. Many worked hard on budgets for the 2018-19 school year, and voters approved overall spending that was about $29 million lower than expected, without hurting children.

Only after budgets were set did the governor demand additional “savings.”As every Vermonter knows, however, once local voters approved local school budgets, local spending levels were set. The only remaining spending flexibility lay in state programs inserted into the Education Fund by both the governor and the legislature, where state programs could be funded by local school property taxes.

A bipartisan legislature rejected the governor’s proposals for education “savings,” no doubt because they would have increased local property tax bills. After a costly and bruising special session, the legislature finally approved a budget the governor wouldn’t sign, but let pass into law. This final 2018-19 Education Fund budget used over $20 million in one-time money (again) to close the still-unaddressed gap created in the 2017-18 budget cycle.

This is essentially the same IOU created in his first term, but which the governor now counts for the second time as an “avoided increase” in his claimed “$70 million in avoided increases.” Using one-time money twice to avoid paying the same bill isn’t double savings, anymore than refusing to pay a $10 parking ticket two times is a $20 “avoided increase.”

And, instead of rethinking delivery of state programs, permanently reducing pension liabilities or tackling tuition and health care costs more broadly, this final FY19 budget “avoided increases” in education spending by taking items out of the Education Fund and putting them back into the General Fund’s “shopping cart.”

Imagine a married couple in which each partner has a salary, and each takes responsibility for some household expenses. Suppose one partner loses a job, and the family must cut costs. The family could cut out cable TV, or coordinate on errands to use less gas. Alternatively, the family could move bills from one partner’s paycheck to the other. One of these approaches involves savings; the other is cost shifting. The former is hard because it requires prioritizing and changing behavior. The latter just kicks the can down the road on cost.

At the session’s end, the legislature’s non-partisan Joint Fiscal Office predicted lawmakers would face a $35.7 million Education Fund gap in fiscal year 2020. The good news? Sales tax revenues are higher than anticipated in the Education Fund. However, the governor proposes to use these revenues for childcare, which would increase the average property tax bill.

Instead of finding real solutions that sustainably support emerging priorities like childcare, he pits two sectors against each other and creates another “crisis.” Soon, these “crises” will coincide with the now-predicted recession and the federal debt time bomb.

What did we lose? Valuable time, good will and opportunities to use one-time money to permanently reduce K-12 costs. We got distracted from working on mental health gaps, clean water, strengthening rural economies, childcare needs and health care markets, all of which affect costs for both government and the private sector. We need better in an age of changing demographics, political fragmentation and fiscal constraint.

The current playbook hurts us. State government is like an ocean liner: lots of momentum, slow to turn. You can’t drive it like a racecar, unless your goal is to beach on a rock. On the other hand, engaged and measured leadership, basic fairness, and attention to details of policy can yield better solutions. None of us can get everything we want, but if we work together, we can get what we need.

Rebecca Holcombe was Vermont’s education secretary under Gov. Phil Scott until she resigned in April.

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